"Government is not reason, it is not eloquence – it is force. Like fire, it is a dangerous servant and a fearful master." – George Washington

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Crunch time

CHICAGO — The dismal fiscal situation in many states is forcing governors, despite their party affiliation, toward a consensus on what medicine is needed going forward.

The prescription? Slash spending. Avoid tax increases. Tear up regulations that might drive away business and jobs. Shrink government, even if that means tackling the thorny issues of public employees and their pensions (and corrupt unions).

Except in Hawaii, where it’s easier for the Governor and his cronies to just steal the money.

The use of capital improvement bonds to finance operating expenses is generally a sign of intense financial distress. Bond rating agencies look down on the practice and often will lower a state’s bond rating—increasing the cost of borrowing—when a State or County is forced to borrow just to meet payroll. But that is effectively what Governor Abercrombie and potential House Finance Chair Marcus Oshiro have come up with–a $100M per year scheme to divert bond funds into the General Fund disguised as a repeal of the subcontractor exemption from the General Excise Tax.